Source: Company reports/Fung Global Retail & Technology

4Q16 Results

Amazon reported fiscal 4Q16 net sales of $43.7 billion, up 22.4% year over year but missing the $44.7 billion consensus estimate. The revenue miss was largely driven by the stronger USD and weaker than expected holiday sales.  Sales would have increased by 24% if a $558 million impact from unfavorable foreign exchange rate changes had been excluded. Fulfillment costs were $5.7 billion, up 25.8% year over year, indicating that fulfillment costs grew at a faster rate than sales. EPS was $1.54, compared with $1.00 in the year-ago quarter and beating the $1.37 consensus estimate. Management highlighted the new Amazon Prime services the company added in 2016. These included a 73% increase in the number of items available for two-day shipping, Prime Video becoming available in 200 countries and territories, Prime Now becoming available in 18 new cities, and new programs such as Prime Reading, Audible Channels for Prime and Twitch Prime.

Details from the Quarter

• Electronics and other general merchandise revenue was $32.1 billion, up 24.4%, helped by sales of millions of Fire tablets and Fire TV devices this holiday season.
• Media revenue was $7.6 billion, up 7.6% year over year. Management commented that Prime members more than doubled their number of video, music and reading activities compared with 2015.
• AWS revenue was $3.5 billion, up 47.0% year over year, but came below consensus estimate of $3.6 billion. AWS opened 11 Availability Zones across five geographic regions, for a total of 42 Availability Zones across 16 infrastructure regions globally. AWS customers migrated more than 18,000 databases and the division released 308 significant new services and features in the quarter, bringing the total number of launches in 2016 to 1,017.

On a geographic basis:

• Revenue from North America was $26.2 billion, up 22.0% year over year.
• International revenue was $14.0 billion, up 17.9% year over year.

FY16 Results

For the full year, revenues were $136.0 billion, up 27.1% from $107.0 billion the prior year. EPS for the year was $4.90, up from $1.25 the prior year.

Outlook

For 1Q17, Amazon expects:

• Net sales of $33.25–$35.75 billion, up 14%–23% year over year, which includes an impact of $730 million, or 250 basis points, from unfavorable exchange rates. The consensus estimate calls for net sales of $35.99 billion.
• Operating income of $250–$900 million, compared with $1.1 billion in the year-ago quarter. This translates to EPS of roughly $0.22–$1.10, below the consensus estimate of $1.61.